Eight Companies Ruined by Their Founders

Michael Dell started his company in 1984, when he was just 19 years old. By 2001, the company he founded as a college student was the largest computer systems provider in the world. In 2004, Dell resigned as CEO but returned to the position in February 2007. By then, the company had already begun to lose its appeal with consumers in the competitive PC business. Despite Dell’s return, the company continued to struggle in its core business. Dell’s worldwide PC market share fell from 15.9% in 2006 to just 10.7% in 2012. Consumers’ growing preferences for tablets and smartphones over PCs have also hurt the company. In addition to losing ground to competitors, the company also caught the attention of regulators. In 2010, the SEC fined Dell $100 million, and Michael Dell $4 million, alleging the company engaged in accounting fraud intended to mislead investors about its performance. On February 5, 2013 Dell reached a deal with a group of investors that included Michael Dell to go private for $24.4 billion, the largest leveraged buyout since the financial crisis, according to The New York Times.

Aubrey McClendon, CEO of Chesapeake Energy since he helped co-found it in 1989 has become known for his lavish compensation packages and extreme bets on his company’s performance. In 2008, McClendon had lost much of his personal fortune after borrowing money to buy massive stakes in his own company. That same year, Chesapeake paid McClendon $100 million. Between 2009 and 2011, Chesapeake paid McClendon more than $57 million in total compensation. In April 2012, Reuters reported that McClendon had again borrowed a large amount of money, in this case $1.1 billion, using his stake in the company’s natural gas and oil wells as collateral. Reuters also uncovered that McClendon was running a $200 million hedge fund that speculatively traded in “the same commodities Chesapeake produces” from within company headquarters. That same month, McClendon gave up his position as chairman due to concerns over potential conflicts of interest with shareholders. He is scheduled to resign as CEO on April 1, 2013.

Martha Stewart remains chairman of Martha Stewart Living Omnimedia even as the company continues to struggle. Stewart’s audience is aging and the company relies too much on the its print magazines. Martha Stewart’s image took a serious hit in 2004 when she was found guilty of conspiracy, obstruction of justice, and making false statements to a federal investigator after she was indicted for insider trading. Although Martha Stewart launched a high-profile “comeback” campaign after her release, her efforts have not paid off for the company, which has not turned a profit in any year since 2007. The company’s stock price is down more than 58% in the last five years. Part of the problem is executive turnover. There have been at least five CEOs and five CFOs since the company’s inception. Many executives argue that Stewart’s excessive involvement has hampered their ability to make change. The sixth CEO, Lisa Gersh, announced in December that she was leaving the company after serving in the position for just five months. Despite the company’s struggles, Martha Stewart was paid more than $21 million between 2009 and 2011.

Mike Lazaridis co-founded BlackBerry, formerly known as Research In Motion, in 1984 and served as co-CEO of the company, alongside Jim Balsillie, through January 2012. The two pioneered the smartphone revolution. Lazaridis, however, failed to prepare BlackBerry for the upcoming competition from consumer-facing rivals Apple and Samsung. Among the largest mistakes that marked the end of Lazaridis’ tenure were the BlackBerry PlayBook tablet, a four day global service outage — which left phones unable to browse the Internet or access emails or instant messages — and a focus on business professionals even as consumer-centric products such as the iPhone absorbed market share. In the third quarter of 2012, BlackBerry’s worldwide market share of mobile device sales, by operating system, was just 5.3%, down from 11% in the third quarter of 2011 according to Gartner.